FDIC Law, Regulations, Related Acts

4000 - Advisory Opinions

Custodial Accounts: Recordkeeping Requirements

FDIC-90-17 April 17, 1990 Sandra R. Comenetz, Senior Attorney

This responds to your March 27, 1990 letter regarding proper
methods under 12 C.F.R. § 330.1(b) by which CDs issued by
FDIC-insured banks and held in bearer, street, or nominee name by ***,
may be registered to both maintain liquidity and ensure that FDIC
insurance coverage passes through to the beneficial owners of the CDs.
You state that: "Details of the parties interests are readily
ascertainable," but express concern that "registration of the
certificates of deposit in the name of *** as custodian for others
would effectively limit the liquidity of the certificates in the
marketplace. . . ."

For *** to support a deposit insurance claim on behalf of a
customer, it must establish the details of its relationship with the
customer and the interest of *** customer in the CD. A proper
registration format on the deposit account records of the depository
institution should identify *** as custodian for its customer. For
example, *** might register the CDs thusly: "[ABC & Co.] as
nominee for *** Bank and *** as custodian for its customers." If ***
records disclose that its customer is, in turn, holding in a custodial
capacity, reference may be made to that customer's records to determine
the details of the relationship and the interest of the person or
entity for whom the customer is holding the CDs. This process may be
continued as long as the records of each party holding in a
representative capacity disclose that the person for whom he or she is
holding is, in turn, holding in some representative or custodial
capacity. In passing on a claim for insurance involving several levels
of ownership, the FDIC may require production of records of parties at
any and all levels to establish the existence of the purported
relationship.

I hope this explanation will assist you in designating custodial
accounts held by *** on behalf of its customers. If we can be of
further assistance, please let us
know.